AUD/CAD bulls have had a heck of a run since it bottomed out in the early days of the pandemic in 2020. But could that run be coming to an end? Will the Loonie take the lead once again?
AUD/CAD Top in the Works?
After bottoming out from a mega trend lower during the early days of the coronavirus pandemic around 0.8080, AUD/CAD has been in rally mode ever since with almost no hiccups in the move. That has brought the pair not only back above pre-pandemic levels, but even further to break the longer-term downtrend as it breaks previous swing highs. It’s been a good run for the bulls, but the question now is, “will this run continue?”
Well, from a technical point of view, we’re seeing minor resistance at the moment with the pair pulling back slightly after testing a falling ‘highs’ pattern. And we can also see a bearish divergence signal between the price and stochastic as the latter is forming lower ‘highs’ against the higher ‘highs’ in price action. This should draw in sellers if the reversal pattern holds.
From a fundamental perspective, the Reserve Bank of Australia decided to extend its quantitative easing program beyond April, likely an attempt to dampen the Aussie’s rise. This was a surprise to traders, and has the potential to be the catalyst for the rally in AUD to fizzle.
On the other side of the pair, the Loonie has been a net gainer so far in 2021, likely on optimism from the Bank of Canada and a rebound oil prices on hopes of a recovery thanks to the release of vaccines.
If these conditions hold and we see some positive numbers from this week’s Canadian job updates, more bearish patterns could form at the falling trendline and spark a reversal in AUD/CAD.
What do you guys think? Is AUD/CAD about to top out? Or is this just a pause in the current uptrend?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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